Three Funds Compared: Watch Our Latest Manager Research Insight

Morningstar's head of fund research Jon Miller joins Ollie Smith in the studio for a look at three funds piquing his team's interest

Ollie Smith 25 October, 2022 | 9:29AM
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Ollie Smith: as we were preparing this video, Liz Truss had the temerity to resign, plunging the UK into further political turmoil! Here to tell me a story that won't go out of date in the next 30 seconds is Morningstar's Head of Manager Research Jon Miller.

Jon, you've got three funds today you'd like to talk about. What's the first?

Jonathan Miller: That's correct. We'll concentrate on the funds, not the politics. And as you and our readers and viewers know, we take a long-term view with our thoughts.

So, we'll start with JPM Europe Dynamic ex-UK, and that's got a Bronze rating from the Morningstar analyst team. So, the fund is run with a quantitative model and what the model looks to seek in stocks is stocks with high quality, attractively valued and supported by positive momentum. So, what the team does is scour the European ex-UK universe every day, pick up some signals, and then they look at that and see where they might want to act or do further work. And the team there is led by a trio of fund managers. There's John Baker, Jon Ingram and Blake Crawford.

Now, with the work they do on those stocks, ultimately, they put together a portfolio that is core like, so not too many style variations but has got a bit of a contrarian leaning. The thing that can happen with quantitative funds, they're looking to capture dynamics in markets, they can quickly miss things when there's a change. So, this year or late last year looking at growth to value, for example, but actually, this model has been pretty good at recent times of changes. So, energy has actually been a driver of outperformance for the fund this year. It's been pretty good consistent outperformance, and the team really cements our positive view. And as I said, it's got a Morningstar Analyst Rating of Bronze.

OS: Fantastic. And what is fund number two?

JM: Sure. So, we're moving on to the US now. So, the Robeco Boston Partners US Premium Equities Fund. It's run by a manager called Duilio Ramallo. He has been running it for 15 years, been at the firm for 10 years. So, he's quite adept at the process and obviously, got a lot of experience in the U.S. market. Now, he's backed by a team of around 20-plus analysts, and that's important because there there's around 130 stocks in the portfolio.

So, the focus is on attractive valuations, business momentum and strong fundamentals. So, given there's a little bit of a quality there, it's not deep value, so it's not really fishing for huge turnaround stories. But the analysts meet company management and really want to dig around a bit more to see that the business is delivering in the aspects that they want. So, it's well diversified with those large amounts of stocks. But actually, it's managed to eke out performance consistently overtime. So, this year, value has done well. So, that's given it a tailwind. But stock selection has been additive, and it has been over the medium and long term. So, we think there's a lot to like here. And the fund has got a Morningstar Analyst Rating of Silver.

OS: Fantastic. And we're going to the UK, dare I say, in the final fund.

JM: That's right. A lot of people say there's attractive valuations and long-term opportunities to be had, and we'll look at Artemis Income. So, an UK equity fund. As it says in the name, it's got a focus on income. A longstanding manager, Adrian Frost, and he's working alongside Nick Shenton and Andy Marsh, who have been with him for a number of years now. So, the fund is actually pretty big as UK funds go, about 4.5 billion sterling. It doesn't have huge flexibility to go down into small and mid-caps, for example. So, we see it as a core like option.

Now what the managers are looking for – they've got a focus on really is free cash flow yield. So, they're looking at companies and really looking at their ability to manage their free cash flow. Then meeting management is really important for them, spending a long time dissecting how good management are at allocating capital. So, when you bring that together, as I said, the portfolio is large cap in nature and core like. It's sitting on a yield of 4.4%, and it holds a Morningstar Analyst Rating of Bronze.

OS: Thank you very much. For more on manager ratings and indeed, the exasperating question of what on earth is going on in the UK, check out any of Morningstar's editorial sites internationally. Until next time, I've been Ollie Smith for Morningstar.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Ollie Smith

Ollie Smith  is editor of Morningstar UK

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